NEW YORK — Leading Internet companies in the US and Europe have embraced global expansion. They recognize that the audience for their products and services is not and can not be limited to their local markets.
In their expansion strategies, however, Latin America has been a low priority. The assumption has been that the Internet in Latin America would be slow to develop. That assumption has proven wrong.
The rate of growth of Internet users in Latin America, and indeed of Internet advertising, has eclipsed all other regions of the world. While the leading US Internet players looked across the Atlantic to deploy their “global” strategies, local Latin American Internet companies have been quick to adapt and deploy localized versions of successful Internet business models battle-tested in the US and Europe.
Many of the more experienced players in the region are learning just how to take advantage of the medium's potential to reach their target markets. They also are rapidly developing their marketing efforts to work the medium efficiently on a pan-regional basis. Ironically, a fair amount of this “learning” has been due to cuts in marketing expenditures, which have forced marketers to evaluate more closely which marketing efforts are delivering results.
Latin America does, however, have a leg up on other regions when it comes to pan-regional marketing efforts. In Latin America, there is a history of pan-regional advertising in traditional media that serves as a base of knowledge for deploying pan-regional advertising on the Internet. And with the Internet offering more flexibility to pan-regional advertisers than traditional media, Latin American Internet marketers will soon have many lessons to impart to pan-regional advertisers in other parts of the globe.
Less than 2 percent of Latin Americans, or 8.7 million users, were online in 1999. By 2003, penetration is forecast to increase to 9.7 percent or 47.5 million users. That's a compound annual growth rate of 53 percent. When combined with the US-Hispanic market, Spain and Portugal, the audience of Internet users in the Spanish and Portuguese-speaking world should exceed 90 million by 2003.
During 1999 and 2000, thousands of general and special-interest Web sites targeting the Spanish-speaking and Portuguese-speaking world have appeared, taking the best lessons from sites developed in the US and Europe. The result has been dozens of richly developed sites in every category. This has made for a highly competitive marketplace which will no doubt see the same consolidation trends starting to happen in the US and Europe.
Looking at the Internet companies that have been successful in Latin America, a clear pattern has emerged. The leading portals that have achieved public financing and best weathered the drop in Internet stocks are those that started with a strong presence in a major market and expanded pan-regionally, developing in-depth content market by market. The same is true for vertical Web sites. Those with a strong local base that have expanded pan-regionally have achieved financing and developed brand recognition. Going pan-regional has therefore been a necessity.
But in aggressively expanding pan-regionally, even the larger sites have stretched their budgets in a period where financing is hard to obtain. The wiser players have reviewed how much they spend offline, where their advertising only reaches 2 percent of the population. The survivors will be those who most efficiently attract their target market with their promotional efforts.
The Internet in Latin America represents an unprecedented opportunity to buy on a pan-regional basis while targeting local markets. In print or cable, where the pan-regional model developed, advertisers must often choose to buy from several players for local advertising or create a universal message for all. The Internet presents a combination of pan-regional content with the possibility of localized segmentation.
This opportunity, coupled with the need for discipline, has made for a quick development of online strategies. Those who have gained experience now “get” the potential of the medium, and are planning their marketing budgets accordingly.
UOL: A Great Case Study
UOL, originally a Brazilian portal, began expanding outside of Brazil at the beginning of this year. Recognizing that other players such as Starmedia, Terra and El Sitio were becoming pan-regional and could potentially dominate the Latin American user base, UOL, as the leader in Brazil, also had the opportunity to take a significant portion of the market.
UOL's strategy began with a generalized campaign for Spanish-speaking Latin America, emphasizing UOL's brand. This rapidly evolved into campaigns tailored for local markets and emphasizing specific UOL services or content areas, such as sports or business. Increasingly, the marketing budget is being allocated to specific countries or products, and the advertising targets Web sites that fit the context.
Similar patterns have developed among players such as El Sitio and Terra, who have taken the learning a step further and deployed their budgets on a purely local basis. Also quick to learn have been vertical players such as auction sites. The more sophisticated of these have learned to target their campaigns by buying keywords related to items that are up for auction on their sites.
What has enabled this rapid learning? First is the intense competition among Latin American sites and the scarcity of capital for them to achieve market share. Second is the ability of the medium to provide feedback to the advertiser on the effectiveness of a campaign. In hours an advertiser can evaluate the number of new users from a general market campaign in Peru and compare that with a banner campaign targeting the keyword “horoscopo” on a pan-regional level. Third is the flexibility of the medium in providing a variety of targeting options. Whereas print and cable have taken years to develop solutions for local targeting to pan-regional advertisers, the same has developed in less than two years on the Internet.
The rapidity with which pan-regional Latin American marketers have developed and deployed strategies for the region has been greater than in other region. If Europe is recognized for the progressiveness of its advertisers and Asia for the potential of mass marketing, Latin America may prove the most effective learning ground for managing marketing efforts across borders on the Internet.